Challenges of Selling Made in USA

To make products domestically, manufacturers have to overcome sourcing, labor costs and other issues.

By Nora Caley

Published: 11.01.2019

While there has always been a demand for U.S.-made products, this trend has seemed to surge over the past few years as consumers become more aware of where and how certain products are sourced. As the shady manufacturing methods of some overseas companies continue to make headlines, pet owners in the U.S. are turning to their home soil for safer alternatives. Although manufacturers and retailers alike are eager to meet this demand, there’s a few hurdles they encounter on the way.

One of the biggest obstacles is all of the regulations that surrounds Made in USA claims. There are several entities that play a role in this, including the U.S. Food and Drug Administration (FDA). According to the FDA’s website, “the Federal Food, Drug, and Cosmetic Act (FFDCA) requires that all animal foods, like human foods, be safe to eat, produced under sanitary conditions, contain no harmful substances, and be truthfully labeled.”

Labeling is where it can get especially tricky, as labels must follow FDA regulations that include identification of the product, net quantity and a list of all ingredients from most to least, based on weight. Individual states also have labeling regulations, and many are based on a model provided by the Association of American Feed Control Officials.

That said, the FDA doesn’t lay down all the guidelines on its own. Enter the Federal Trade Commission (FTC), which has authority to act against deceptive business practices and controls Made in USA, Made in America and other similar claims about a product’s U.S. origins. The FTC requires that “all or virtually all” of a product be made in the U.S. to use the Made in USA claim, and contain “no—or negligible—foreign parts.”

That means it’s not enough if the product’s final assembly or processing takes place in the U.S., as the FTC considers other factors, including how much of the product’s total manufacturing costs can be assigned to the U.S.

The “no—or negligible—” standard gets complicated because sometimes certain ingredients—such as exotic proteins and spices—just aren’t available in the U.S., and although overseas manufacturers may have sourced those items responsibly and adhered to their own country’s strict guidelines, U.S. manufacturers that utilize those products are unable to label their products as Made in USA… even if it’s only that one element.

“You have to be very careful with your claims now,” says Lynda Winkowski, president of Sunrise, Fla.-based Angels’ Eyes. “The consumer likes that it’s Made in USA. They prefer that, and they prefer natural, and they like certain kinds of buzzwords.”

With all that red tape in place, “it takes a lot of effort to find a company that can produce your product,” explains Janet Reyniers, vice president of Python Pet Products.

When her late husband, company founder Lance, came up with the idea for the Python Hook, which is used for refilling the water in an aquarium, it took the company a year to find a company that could produce it.

Reyniers explains that Python went through the process of contacting a company close to them, who referred them to someone else, who referred them to another person, who then referred them… well, you get the idea. After looking into manufacturers in several states, Python ultimately found the one in its own backyard.

Reyniers explains that partnering with a manufacturer in the company’s home state of Wisconsin helps it maintain and oversee quality control. If there’s ever a problem, Python is able to address it immediately and, if necessary, meet with the supplier the same day.

In the end, all that leg work was, “well worth it, because the quality can’t be beat,” says Reyniers. “I’m glad Lance never gave up because he believed the consumer deserves the best.”

As an alternative, manufacturers also have the option of cutting out the middle man and purchasing their own facility. It’s in a similar vein to Python’s method of partnering with a production plant in the same state, but it allows the company to be completely hands-on in all aspects of production, enabling it to confidently speak about its sourcing and manufacturing process.

This is the tactic Dr. Bob Goldstein, co-founder of Earth Animal, employed when he was developing Wisdom, a line of dog food slated to launch in January. Two years ago, Dr. Goldstein decided he wanted to formulate Wisdom only with ingredients that came from the U.S.

In its search for a production facility, Earth Animal contacted several private label and other manufacturers. The company was not confident that these manufacturers could meet its specifications for high-quality, safe and made in the U.S. ingredients, which lead to it looking into other options. Luck and timing intervened when Dr. Goldstein found out that the manufacturer of the company’s baked treats was facing a financial hardship.

“They were having a little bit of a struggle, so we sat down with them and we said, ‘We’ll purchase you, you will continue to run the plant for us and we want to make sure we control everything,” explains Goldstein. “They said, ‘You’re on.’”

By owning its manufacturing facility, Earth Animal is able to oversee the sourcing of all ingredients. There are no brokers or intermediaries, and the company gets meats and other ingredients directly from U.S. farms. This allows the company to, “control everything from farm to finished product, and guarantee everything [it does] is Made in USA.”

Dr. Goldstein does acknowledge that Earth Animal “went to the extreme, purchasing a very expensive plant,” which may not be feasible for most manufacturers.

Penny Pinchers

The main deterrent against purchasing products that are made in the U.S. is cost. Items that are Made in USA do come at higher price points, which makes sense: Josh Wiesenfeld, founder and CEO of Boxiecat, explains that this is because, “wages, and other overhead costs, are higher in the U.S.,” as companies have to adjust their production costs in order to pay their workers a livable wage.

According to the Bureau of Labor Statistics’ May 2018 numbers, the average hourly worker in the U.S. makes $14.13 per hour, compared to CNBC’s 2017 report outlining the $3.60 per hour of Chinese workers and $0.50 per hour of Sri Lankan laborers.

Because of this, consumers believe that if a product is Made in USA, the cost will automatically be higher, says Eric Johnson, CEO of VetiOx, a brand of ReliOx Corporation. That’s where retailers have to lay out the cost versus the benefits.

“Specific to odor elimination, there are few in the industry who understand the chemistry and physiology of animal odor and its control,” Johnson says. “Our product cost may be a little higher as compared to products that are mass produced outside the U.S., or that work to generally cover up odors, however, since you use less and get a more effective and immediate result with VetiOX, ultimately it is not [more expensive].”

As a bonus, Johnson adds that higher margins provide retailers with an excellent profit opportunity.

On the positive side, Made in USA can also be a key differentiator for both sustainability and safety features. Wiesenfeld says local production supports U.S. economies and provides an Earth-friendly element.

“Making our products in the U.S. not only has a positive impact on the environment—since our products do not have to travel as far—but also adds jobs in the U.S.,” Wiesenfeld says.

Although the size of the company’s carbon footprint and safety standards are influential, shoppers are still going to be reluctant to hand over a couple extra dollars for U.S.-made products.

“Many clients request Made in USA but are not always willing to pay the price that goes along with it,” explains Barbara Ratner, founder and owner of Boca Raton, Fla.-based Holistic Pet Cuisine. “As explained to our clients, Made in USA products may be [more expensive] than expected due to the safety net of the FDA.”

She points out that an aspect of safety that some manufacturers might want to be aware of is the packaging they use for their goods, as many bags contain high levels of carcinogens. For its K9Crisps treat offering, Holistic Pet Cuisine bags them in safe, U.S.-made packaging.

Creating and selling U.S.-made products can, at times, be discouraging. There’s a lot of hurdles to clear, and it’s true that Made in USA won’t outsell other products on patriotism alone. Some customers consider it a necessity, while others simply view it as a perk or a tie-breaker. That’s why retailers need to be aware of just how much leg work and time manufacturers put into getting their products the Made in USA claim, and relay that information to customers along with the economical and sustainable benefits these products provide. A little bit of knowledge will go a long way. PB